Monthly update

Its been over a month since my last update and the markets have pretty much just been dancing around going nowhere. Last month the NSE 20 share index closed at 3092 and since then we have continued to see further weakness with the index closing this month at 3016. The 3000 psychological support level is still holding. This level has no statistical weight to it and is simply a pure psychological level which means that the market can slice through this level pretty easily.

1. The NSE 20 share index

   

   The NSE 20 share index monthly chart reveals a market that is still in a confirmed downtrend. Though liquidity has dried out, the market still cant seem to find the strength to push higher. The monthly RSI and MACD are still in deep oversold territory and are yet to signal a change in trend.

   

   That weekly 50 day moving average has been my line in the sand. The markets have tried to push above this average several times but have been unsuccessful and is now beginning to selloff. The MACD is right now giving a fresh sell signal. Even with liquidity being this low, I cant help but wonder if we will see further weakness. One thing that’s certain though is that if that 3000 level is broken, then expect to see an acceleration of the selloff.

   

   The 200 day moving average support that has been holding has been broken. We are right now trading below this significant moving average and it will be interesting to see if we continue to see weakness. Notice also that the break today occurred with above average volume. How we trade tomorrow and for the rest of the week will paint a clear picture of where we are headed.

2. The NSE ALL Share index

   There is not much historical data on the All share index to paint a clear monthly or weekly picture. The index is fairly new to the market and thus a daily chart will be most accurate in painting a picture of where we are.

   

   This index reveals a market that has been moving sideways since July. Prices are still above the 200 day moving average. This to me looks like a consolidation pattern which is yet to resolve either to the downside or upside.

   Looking at these charts, its clear to me that the markets look weak going forward. Am not a buyer of stocks at this time, now the bond markets look much more appealing to me and I think we will continue to see much more interest in this market as investors look for ways to diversify their portfolio.

   I must also say that its encouraging to see investors finally embrace the bond markets and its about time if you ask me!!

    

Conviction Buy- List Review

Its been more than a month since I put together my conviction buy- list and I think its time we reviewed the featured stocks.

1. Coop Bank (COOP).

   

   This one is painful.. I had to sell this stock when it broke its MA (50) support since it represents, in my opinion, a failed breakout. In my conviction Buy- list post back in June, I referred to a “cup and handle” pattern that had formed on COOP. in traditional technical analysis, this patterns is considered a basing pattern that once resolved is usually bullish. A break above that handle (consolidation zone) is the buy signal. Well.. In the days and weeks that followed my post, COOP was not able to break above the consolidation zone. The stock broke its MA(13) support and continued selling off finding temporary support at EMA (30). We then witnessed some sideways movement before COOP finally broke and closed below MA(50) support on Aug 21st. That was my sell signal since that moving average was my last level of support. Since breaking support, COOP has continued to sell off and with the daily RSI now firmly below 50, am out of the trade, and will wait for prices to settle and begin trending up.

    
    

2. Centum Investment Company Ltd (ICDC)

   

   Yet another one bites the dust. Its beginning to look like my conviction buy- list is turning into a sell- list.

   ICDC ‘s chart tells the tale of a stock that could not break out above its recent high. We did not even get close to the sh. 20 price target that I had set on July 2nd. Instead, the stock began to roll over and gradually sell off. Well ICDC broke the 200 day moving average support and closed below it. This to me is where I call it quits and sell the stock especially because the stock is trading below all its moving averages and plus the RSI is now setting new lows. These are all signs of weakness and there is no telling just how low this thing will go so for now, am a seller of ICDC.

    
    

3. Mumias Sugar Company (MSC)

   

   And its MSC to the rescue.. MSC is still in an uptrend. Since its breakout above the MA (200), it has continued its steady advance with few rests in-between. I still like MSC as a buy and will take any weakness as a chance to load up on some more shares. One thing I would like to see is MSC taking out its recent highs (Sh. 7.40); besides that, support is holding nicely and we are firmly in a confirmed uptrend in MSC.

    
    

4. Access Kenya (ACCS)

   

   In the conviction Buy- List post back in July, I indicated that ACCS was due for a pullback and that I was a buyer at any pullback. Well, we did get the pullback and a significant one at that. Prices have since broken every level of support and just today we witnessed a break of the 200 day moving average support at Sh. 20.68

   With ACCS closing below Sh.20.68, am weary of buying any more shares. Should we get follow-through weakness next week, then that will be my sell signal. Its still too early to know if this break of support is a sign of further weakness ahead but one thing that’s clear (at least to me) is that my warning bells are ringing though am still to pull the sell trigger.

    
    

5. Barclays Bank Ltd (BBK)

   

   On July 2nd in the Conviction Buy- list post; I noted that-

   “Barclays seems to be consolidating around the Sh. 55 level. It should be noted that that price level acted as significant resistance earlier this year and it makes sense that the stock should stall at this level. There is overhead supply at the Sh. 60 level”.
   

   Subsequent price action proved the analysis to be spot on. Notice that after stalling at the Sh. 55 level, BBK sold off for 3 consecutive days finding support at MA (13). After this selloff, the stock turned around and made a move towards the Sh. 60 level and tried to break above this price level for 3 consecutive days but was unsuccessful; that my friends is what we call a REJECTION!!. What followed after this failed attempt was a selloff that has continued to date bringing BBK back below its 200 day moving average support which is at Sh. 47.28 With the stock closing below this support level for three consecutive trading days; this to me spells out a SELL. I do not know how low this will go but one thing that I do know is that once a significant support level is broken, then watch out below..